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High renewable electricity penetration: Marginal curtailment and market failure under “subsidy-free” entry

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  • Newbery, David M.

Abstract

Ambitious plans to decarbonize electricity will require high levels of variable renewable electricity (VRE). At high VRE penetration, the surplus that cannot be exported must be curtailed (spilled). The last MW of wind capacity will be curtailed 3＋times more hours than the average, but even in efficiently designed markets, price signals for VRE investment are given by average, not marginal, curtailment, creating a “tragedy of the commons” that requires a corrective charge to restore efficiency. The paper sets out an analytical model calibrated to Ireland in 2026, showing the source of this distortion and estimates of its magnitude.

Suggested Citation

  • Newbery, David M., 2023. "High renewable electricity penetration: Marginal curtailment and market failure under “subsidy-free” entry," Energy Economics, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:eneeco:v:126:y:2023:i:c:s0140988323005091
    DOI: 10.1016/j.eneco.2023.107011
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    References listed on IDEAS

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    6. Tourgeman, Miriam & Cohen, Chen & Rubin, Ofir, 2024. "Preserving competition and economic welfare in Israel's PV market," Utilities Policy, Elsevier, vol. 91(C).
    7. Newbery, David M. & Biggar, Darryl R., 2024. "Marginal curtailment of wind and solar PV: Transmission constraints, pricing and access regimes for efficient investment," Energy Policy, Elsevier, vol. 191(C).
    8. Sirin, Selahattin Murat & Elshurafa, Amro M. & Cakmak, Nurullah, 2025. "The impact of variable renewables on price dynamics within wholesale electricity markets," Utilities Policy, Elsevier, vol. 95(C).
    9. Tomasz Sieńko & Jerzy Szczepanik, 2025. "EU Energy Markets and Renewable Energy Sources—Are We Waiting for a Crisis?," Energies, MDPI, vol. 18(15), pages 1-19, August.
    10. Simshauser, Paul, 2025. "Competition vs. coordination: Optimising wind, solar and batteries in renewable energy zones," Energy Economics, Elsevier, vol. 143(C).
    11. Milstein, I. & Tishler, A. & Woo, C.K., 2024. "The effect of PV generation's hourly variations on Israel's solar investment," Energy Economics, Elsevier, vol. 136(C).
    12. Sherin S. Das & Rudrodip Majumdar & A. V. Krishnan & R. Srikanth, 2025. "Exploring urban water‐energy nexus: A case study of thermal power plants in Raichur and Ballari districts in Karnataka," Natural Resources Forum, Blackwell Publishing, vol. 49(3), pages 2814-2844, August.
    13. Karipoğlu, Fatih & Denizli, Osmancan, 2025. "Towards renewable energy islands in Türkiye: Potential and challenges," Renewable and Sustainable Energy Reviews, Elsevier, vol. 211(C).
    14. Hassanzadeh Moghimi, Farzad & Boomsma, Trine K. & Siddiqui, Afzal S., 2024. "Transmission planning in an imperfectly competitive power sector with environmental externalities," Energy Economics, Elsevier, vol. 134(C).
    15. Chen, Huanhuan & Li, Jinke & O'Leary, Nigel & Shao, Jing, 2025. "Higher prices in a more competitive market: The paradox in the retail electricity market in the United Kingdom," Structural Change and Economic Dynamics, Elsevier, vol. 72(C), pages 374-390.
    16. Daniel Navia Simon & Laura Diaz Anadon, 2025. "Power price stability and the insurance value of renewable technologies," Nature Energy, Nature, vol. 10(3), pages 329-341, March.
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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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